Market Commentary for the week ending December 25th, 2020
- Small U.S. stocks continued higher while everything else gave back some gains.
- The housing market shows some signs of slowing impacted by higher prices.
- Consumer Confidence tumbles but optimism rises about the future.
This Week’s Performance Highlights
- Large U.S. stocks were flat for week, as measured by the S&P 500, while the Dow Industrials gained a fraction and the NASDAQ Composite was higher by +0.4%.
- Small U.S. stocks outperformed all other equity groups gaining +1.9% and now higher by +21.8% for the year as compared to large stocks up +16.8% year-to-date. The rally in small stocks has been very strong and persistent since the end of October up more than +30% in less then 2 months!
- Energy stocks have been on a tear as well since late October but slipped -3.2% for the week. Tech and financials were among the winning sectors up +0.6% and +1.6% respectively.
- International stocks retreated a bit for the week with developed markets down -0.4%. Japanese stocks were the worst performers among this group down -1.1% while Eurozone stocks were off just -0.3% helped by gains of +0.6% in both Spain and Italy.
- Emerging markets dropped -1.7% for the week impacted meaningfully by a drop of -2.0% for Chinese stocks, the biggest of the emerging markets.
- All of the alternative asset classes were lower with real estate stocks down -1.0%, gold off a small -0.1%, and commodities lower by -0.7%.
- Bonds prices were also lower for the week down -0.1% but holding onto a strong year-to-date gain of +7.5%.
New Home Sales were slower than forecast for the month of November down -11% from the month before to an annualized rate of 841,000. Higher prices in 2020 are being blamed for some of this slowdown although sales are still up +21% over the same period a year ago.
Existing Homes Sales were also lower for the month but only by -2.5% to an annualized 6.69 million. A record low supply of homes, just 2.3 months at the current sales level, and prices higher by +14.6% during the past 12 months are arguably impacting demand.
Economists had expected Consumer Confidence to rise in November by it instead tumbled to a reading of 88.6 compared to 92.9 the month before. This month’s report is just above the pandemic low of 85.9 registered in May and remains far below the pre-pandemic 132.6. This month’s disappointment was driven by a sharp drop in how consumers feel the economy is performing now while they became slightly more optimistic about what they expect 6 months from now.
Initial Jobless Claims improved from the week before falling to 803,000 which was also much better than forecasts. Continuing claims, including both state and federal programs, were also down for the week at 20.36 million.
Upcoming Economic Reports
- S&P Case-Shiller Home Price Index
- Chicago Purchasing Managers Index
- Initial Jobless Claims